Reports: IRS modernization off track

The IRS needs to make significant improvements in program management to keep its multiyear, multibillion-dollar modernization effort on track, three oversight bodies have said.

The latest criticism came from the IRS Oversight Board, General Accounting Office and Treasury Inspector General for Tax Administration, all of which released reports recently.

'IRS knows it's in trouble, knows the problems and has plans to fix it and is in the process of executing it,' Oversight Board chairman Larry R. Levitan said. 'We would like to see it move faster and see more results.'

To do that, IRS needs to strengthen its management team, he said, adding that Computer Sciences Corp., the prime contractor on the modernization project, must be involved in the effort to improve management.

'The IRS is very dependent on the contractor,' Levitan said. 'We need a better track record of performance and CSC has to strengthen its team and show better results.'

John Reece, the tax agency's deputy commissioner and CIO, said the IRS recently revamped the way it makes project estimates.Estimates for each project are made only after a project's business case has been prepared, he said.

'You will see that we stay closer to the numbers because we are being very careful when we do the estimating,' Reece said. 'The prime contractor is also working on new estimating features.'

In its report, Business Systems Modernization: IRS Needs to Better Balance Management Capacity with Systems Acquisition Workload, GAO said 'as the IRS moves forward to implement its plan, it faces increasing risk that it will be unable to deliver promised system capabilities on time and within budget.'

The report criticized IRS for its lack of management controls and capabilities, such as a human capital management plan and a reliable cost-estimating process for the project.

Without these controls, the project has already experienced cost overruns, schedule delays and performance shortfalls. For instance, the Customer Account Data Engine, the relational database that stores information about the nation's taxpayers, has been delayed by six months and has cost $5 million more than planned.

'You don't plan infrastructure around the single projects,' he said. 'You take all program requirements and aggregate them with the existing systems and find what's the total capacity and what's the best way to design a system.'

The inspector general's report, The Business Systems Modernization Office Needs to Strengthen Its Processes for Overseeing the Work of the PRIME Contractor, said four audits of systems modernization projects showed that the IRS and CSC 'have been overly optimistic about their timetable' for delivering changes.

'Further delays could erode confidence in the IRS' ability to deliver modernized systems needed to dramatically improve both internal operations and service to taxpayers,' said Pamela Gardiner, deputy inspector general for auditing in the IG's office.

The IRS does not have enough controls on cost, the report said. For instance, the e-Services project was delayed for nine months and had a cost overrun of $4.2 million, 32 percent more than the original estimate.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and the committee's ranking Republican, Sen. Charles Grassley of Iowa, said in a joint statement that the report 'raises troubling questions about the agency's ability to manage this undertaking and to timely deliver modernized systems within budget.'